Responding to the
recent price hikes of fertilisers in China, the government now has warned the
industry to keep their pricing reasonable and transparent. According to CCM,
this order will likely lead to fewer price hikes and fairer international
competition.
The
National Development and Reform Commission of China announced in late November,
that the domestic fertiliser industry should strengthen
self-discipline and that relevant associations, instead of facilitating price
fixing or gouging, should encourage fair competition and maintain market order.
According
to the announcement, fertiliser traders are required to price their products
based on operation costs, market supply, and demand. Product prices, including
hikes or discounts, should be clearly indicated.
The
Commission furthermore gives more requirements on different pricing situations,
like extra fees that are not included in declared prices should not be charged,
dumping prices to drive out competition is forbidden in the domestic market,
and monopolistic agreements, including price fixing through collective limiting
of production or the discussion of price, output and sales volume during
conferences, are not allowed.
Some
industry insiders believe that the NDRC has noted there are other factors
pushing up fertiliser prices besides rising raw material prices, declining
fertiliser output and tight market supply. The industry should take seriously
the prospect of the NDRC taking action to constrain soaring prices.
According
to market intelligence firm CCM, domestic prices
of monoammonium phosphate (MAP), diammonium phosphate (DAP) and
compound fertilisers have sharply increased since Sept. 2017 in China. Prices
of MAP and DAP were partly driven up by higher raw material costs.
In
addition, the holding of conferences by China's mainstream ammonium phosphate
enterprises may also have led to increased prices. Since the last quarter of
2016, these kinds of conferences have been held every two months. At these
conferences, participants share production and operation information with each
other, discuss domestic and overseas sales and agree on future production and
pricing plans. DAP manufacturers have benefited in this way by collectively
agreeing to limit production, thereby engaging in price fixing, so most of them
have maintained an average operating rate of 50%–60% this year.
Following
the NDRC's announcement, these kinds of conferences will almost certainly be
held less frequently, avoiding excessive interference
in fertiliser pricing and reining in current price hikes.
About CCM
CCM
is China's leading market intelligence provider covering the fields of
agriculture, chemicals, and food & feed.
If
this information is useful for you, why not check CCM's monthly Fertiliser Newsletter,
which contains all newsworthy information on
China's fertiliser market, including Market Trends, Company Dynamics,
Politic Changes, Trade Situation, and much more.